Affordable Assisted Living

The assisted living industry is about 20 years old, but an explosion of activity has occurred in recent years. The number of licensed facilities grew 24% from 1998 to 2000. The Assisted Living Federation of American has grown to over 7,000 members.

Most of the development has occurred on the high end or private pay market. Creating affordable assisted living has proven more challenging.

Creating affordable assisted living is the goal of the RWJF grant. The grant is an extension of the Coming Home Program started in 1992 by RWJF and the NCB Development Corporation (NCBDC), a community development bank. The Coming Home Program helps communities, especially rural communities, develop affordable assisted living residences that integrate and coordinate health, social and personal care services and housing for frail or chronically ill older persons.

To create affordable assisted living in Arkansas several steps must be taken. To provide care to more than 2 unrelated individuals Arkansas law requires a license and a permit. Facilities must obtain a licensed from the Arkansas Department of Human Services (DHS) and a Permit of Approval (PoA) from the Health Service Commission.

As the first step in creating affordable assisted living, DHS has issued draft regulations for assisted living facilities. Currently, DHS licenses only Residential Care Facilities (RCF) and Nursing Homes. A fundamental difference between RCFs and Assisted Living Facilities (ALFs) is that ALFs will be allowed to provide limited nursing care and medication administration. Also, newly constructed ALFs must offer single occupancy rooms with private baths.

Another step is that the Health Service Commission must develop a Permit of Approval process for Assisted Living Facilities.

Thirdly, there must be a way to pay for the services for individuals with limited incomes. DHS is developing a "Medicaid Waiver" to pay for services in licensed and permitted ALFs. A Medicaid Waiver allows the state to draw down federal dollars to pay ALFs for services they provide to low and moderate income citizens.

Even when all the these pieces are in place a forth step must be achieved. If the assisted living is to be affordable, the facility's rent must be within reach of low income individuals. If traditional private market financing is used, this is not possible to achieve. With conventional financing, monthly fees for assisted living can range from $1,800 to $5,000 per month, pushing assisted living out of the reach of many seniors.

The Coming Home Program has a proven track record for building facilities that are modern, attractive and affordable, with rents as low as $450 per month.

Finding financial resources to build or renovate safe, clean, and architecturally appropriate housing that seniors with limited incomes will be able to afford is achievable, but is not easy, according to Joseph Alpher who has written about the Coming Home concept. "There are a number of ways to accomplish this, primarily through the use of the low-income housing tax credit program and equity or reduced interest rate loan programs. But many obstacles exist that are not easily overcome."

"It's a formidable undertaking, particularly for most nonprofit organizations that would be involved in creating assisted-living facilities for low-income elderly populations," says David Nolan, vice president of the NCB Development Corporation. "These organizations would certainly have the experience to manage such a facility, but they just don't have the staff or the expertise to pull together all the different financing and development pieces needed to make such a facility happen."

The purpose of the RWJF Coming Home grant is to help the State of Arkansas and operators of assisted living facilities develop the expertise required to use tax credits and other financing tools required for affordable assisted living.

By winning the grant, the State also has access to an $8 million revolving loan fund to pay for predevelopment costs for qualifying assisted living projects.

As a partner in the grant application, the Arkansas Finance Development Authority (AFDA) agreed to set aside some tax credits specifically for affordable assisted living facilities. AFDA also provides low interest financing through the HOME program.

Other financial support can come from the Federal Home Bank, HUD 232 Mortgage Insurance, and bonding authorities.

While many challenges exist to develop affordable assisted living, experience has shown it can be done. With the commitment of the RWJF and the NCB Development Corporation, Arkansas has obtained expertise and financing previously lacking.

As America prepares for a doubling of its aging population, solutions like affordable assisted living must be made to work.